The Attempted Suicide of Hewlett-Packard

That’s a very provocative title, and deliberately so. I’ve never seen a company try so hard to kill itself as HP has over the past few years. Given their status as a Silicon Valley pioneer and stalwart, it’s painful to watch.

We should start at the beginning, which in this context is the ill-conceived acquisition of Compaq by Carly Fiorina, which was implemented over the strong objections of Walter Hewlett. Although there’s no way to prove it, I firmly believe this move was more about a CEO wanting to make a name for herself than it was about generating value for shareholders. Even if the idea itself had been sound (it wasn’t), the execution was so abysmal that Fiorina was forced out.

Fast forward a few years and HP is recovering nicely from the Fiorina era under the guidance of Mark Hurd. Then scandal hits and Hurd is unceremoniously show the door. In this day of politicians tweeting pictures of body parts, an extracurricular tryst between two consenting adults hardly seems grounds for dismissal, particularly for a company that desperately needs stability. But out he went and not coincidentally he ended up at Oracle (whose stock is doing just dandy, BTW).

Former SAP head Leo Apotheker assumes the throne and promptly announces HP is exiting the PC business, apparently before consulting……well……anyone. No one is more surprised than HP’s partners. Leo is soon shown the revolving door.

Lest we think their only mistakes are in hiring the wrong leaders, let’s take a quick look at aquisitions: besides the aforementioned Compaq, we also have Autonomy, which turned out to be overvalued. A small analytics firm valued at $10 Billion is overpriced? Whoever would have thought? And don’t get me started on Palm…

Finally, at the most recent HP World the motto trotted out by the marketing department was “HP is Back.” Their timing couldn’t have been worse, as a layoff of over 16,000 people was announced the week before. As expected, the IT press (and HP’s competitors) had a field day with that one.

A series of blunders like these would have killed a lesser company, but HP survives. Remarkably, they are still revenue leaders in the PC, server, and printer markets, but they are losing market share in servers while both the server and PC markets overall are shrinking. That doesn’t bode well for the future of the firm.

HP has all the ingredients of an innovative powerhouse instead of a sickly giant, but what moves would they have to make to get there? Here are a few suggestions:

Make Big Data and Analytics one of the pillars of the business: The pieces are all there, from the servers to the software to the analytics engines and necessary services. Autonomy may not have been worth what HP paid, but there is value to be gained from their technology. Some may argue that Big Data is all hype, but the fact is that data continues to grow at exponential rates and the means to deal with that will be big business for a long time. HP is in great position to exploit this market if they decide to.

Dump the networking business unit: HP is a me-too player in this market, and that won’t change unless they can come out with something that will revolutionize how networking is done. And no, I don’t mean SDN. Feel free to hold onto the proprietary pieces that are necessary for blade servers, but the rest needs to go. Speaking of which…

Double down on blades: As public cloud becomes more and more popular with companies looking to shed the responsibility of infrastructure management, those who provide that service will be looking for the easiest way to build and manage clouds. Blades will shine here, providing savings in space, power, and cooling, but additionally providing easier management (for one thing, it’s easier to replace a blade than a rack server). Cisco is making a killing in this space because they made management of their blades dead simple. HP made a good move by introducing OneView, but that only catches them up to Cisco (if that).

Invest in flash: Companies like Pure and Tegile have shown there is a huge market for affordable flash. As I mentioned in an earlier post, 3Par has finally dipped their toes in the all-flash arena as well, but they could afford to take it further and make a major push. HP is a significant player in storage, and along with EMC and NetApp the market is theirs to lose.

Innovate, dammit: Not long ago HP’s motto was “Invent”, which was irony at its finest. HP’s best “innovations” recently have been Moonshot, OneView, and their move into SDN. Two of those are simply attempts to play catch-up. Few companies have the R&D resources of HP, but many are making better use of what they have.

Listen better to partners: Having worked for two large partners of HP’s, I can attest that there is room for improvement here. It seemed that whatever we suggested fell on deaf ears, and major moves were announced that caught us by surprise. HP’s bread and butter, like many IT manufacturers’, is the channel. Listen to them.

Meg Whitman’s tenure has thus far been been marked by massive layoffs, but there have also been shining moments of lucidity and hope. if nothing else the stock is on a slow, steady incline. Those who were quick to point out that she had no experience in technology manufacturing forgot that good leadership isn’t usually domain-specific, and that a good leader is usually defined by knowing how to have the right people working on the right things. Whitman still has much to do, but certain moves so far indicate she might be able to take the ailing behemoth in the right direction. Time will tell.

About Me

Hi, I'm Randal Scott King, but feel free to call me Scott. I'm the managing partner of Brilliant Data, a consulting firm specializing in analyzing data for companies looking for a new competitive advantage. I'm also the technical reviewer for a couple of books on Big Data and the author of a video training on Hadoop by Packt Publishing.
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